Is It Safe to Get Back into the Stock Market?

After the stock market started dropping on February 19, 2020 due to the coronavirus pandemic, some investors pulled out of the stock market. Other investors remained invested, but shifted their asset allocations to a more conservative mix of investments. When is it safe for these investors to jump back into the stock market?

The stock market is never really “safe,” but the recovery began on March 24, 2020, about a month after the start of the bear market. 

Pulling out of the stock market just locks in losses and causes you to miss out on all or part of the recovery. It is better to remain invested than to try to time the market. 

If you blink, the recovery will have already happened and you will miss out on the opportunity to regain some of your losses. If current trends continue, the S&P 500 will be fully recovered in two more weeks and the Russell 2000 will have fully recovered in about a month. 

It took about a month for the stock market to drop by about a third. It will have taken about three months for the stock market to fully recover from the bear market. It always takes longer to recover from a bear market than it takes for the stock market to drop. 

This chart shows the change in investment returns as compared with where the stock market was at the beginning of the year. It graphs the performance of the S&P 500, Russell 2000, the MSCI EAFE Standard Index (Foreign Stock) and the MSCI US REIT Index (Real Estate).